US stocks rose to a record with the S&P gaining +0.6% and the Nasdaq +1% (the S&P, Nasdaq, and Russel are also all trading on the upper line of their respective Bollinger band), supported by a broad base dollar selloff which was itself triggered by a dovish interpretation of Fed Chair J. Powell speech who said at Jacksonhole’s gathering of central bankers that he did not see risks of the US economy overheating. While the Fed Chair seemed to confirm the outlook for two more rate hikes this year (including one 25bps for September and another one likely in December), he did not signal an intention to tighten at a faster pace either which sufficed to trigger a large dollar selloff and a switch to “risk on” mode as US indices which had flirted with all-time highs, finally pierced that level. European shares also gained but lagged with a 0.3% average gain. The story remains one of relative economic decoupling (with all the strings attached to the recent softening in real estate data, the steady decline in the economic surprise index or even last Friday’s disappointing US durable goods order -1.7% decline registered in July) and foreign piling of US stocks for mostly momentum reasons. Interestingly, the FT featured an article on Friday saying that at record high, the US market is still shrinking which highlights the overwhelming importance of share buy back to explain the US stock market rally and outperformance (more than USD1trn this year alone). At least one company is not going to pull out of public markets, Tesla after E. Musk ditched last Friday his idea of bringing the company private after creating a big controversy about having already secured the funding to take his company private (causing yet another squeeze in the stock). This article also noted the rising importance of private funding for start ups which is changing the nature of equity markets in the sense that it contributes to take out stock market investors from the value creation. Another “anomaly” of listed equity markets is that they are being led by a very narrow number of (mostly overvalued) tech stocks. Still there is probably no point fighting this trend…for now. EM currencies rallied across the board led by a 1.4% gain in RUB. The Chinese currency squeezed as well. MXN also gained close to 1% on expectations for near term breakthrough on US/Mexican trade negotiations. Going from his usual spanking to his usual caress, D. Trump said on Friday that the relationship with Mexico was “getting closer by the hour”… “A big (bilateral) trade agreement with Mexico could be happening soon”, he tweeted. The deal could involve tariff free access to the US for cars produced in Mexico as long as long as 75% of used components are coming from the US (from 62% currently). There is no love between Canadian Prime Minister J. Trudeau and D. Trump since a few months. So, nothing seems to be expected for Canada for now. It seems as simple as that… As the dollar weakened, EUR rallied across the board including vs. EUR and with some gathering momentum vs. GBP as Brexit negotiations land nowhere. An increase in the net speculative short positioning on GBP (to -72k from -61k) was the sole highlight of the COT report on Friday. 10Y US Treasuries dropped -2bps to 2.81% while 10 Y Bunds yield rose 1bp to 0.35% while Italian BTP underperformed by 6bps, ahead of important budget discussions (from which we expect common sense to prevail with the European Commission admitting the Italian budget can slip as Italy shares an unfair burden for the handling of the migrants’ situation. The precious metals complex rallied strongly on Friday on the heels of dollar weakness, with Gold gaining +1.7% (and silver a little over 2%) while gold shares rose +2.7% (still -11% mtd, -17% ytd), perhaps bringing an end to their recent strong underperformance. Oil gained 1% as well. ————- This is a delayed and abbreviated version of our premium subscription-based report published ahead of the US and European session every day. For a timely and up to date detailed global markets commentary, a comprehensive suite of market reports with global tactical model portfolios and daily insight, join a free trial to our premium research or contact us. Discounts may apply for both private and professional subscription plans. 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